Roxio Beats Fourth Quarter Estimates And Plans For Substantial Growth From Napster In Fiscal 2005
"Napster and Dixons Group Sign Multi-Year Agreement to Support Napster's Planned Summer Launch in the UK"
Santa Clara, California - (May 5, 2004) - Roxio®, a division of Sonic Solutions® (NASDAQ: SNIC), the leader in digital media software, today reported financial results for its fiscal fourth quarter and year ended March 31, 2004 . Separately, Napster today announced that it has signed a multi-year marketing partnership with Dixons Group plc, the largest electronics retailer in the United Kingdom . Under terms of the agreement, Napster will be promoted as the only on-line music service available at the Dixons Group, which encompasses 1,100 Dixons, PC World, The Link and Currys storefronts.
Roxio's net revenues for the fourth quarter of fiscal 2004 were $33.6 million, compared to $33.8 million in the fourth quarter of the prior fiscal year. Roxio's reported net loss for the fourth quarter was $6.6 million, or $0.20 per basic and diluted share, as compared to net income of $2.3 million, or $0.12 per basic and diluted share, in the fourth quarter of the prior fiscal year. Shares used for computing basic and fully diluted earnings per share were approximately 32.7 million for the fourth fiscal quarter ended March 31, 2004. Shares used for computing basic and fully diluted earnings per share were approximately 19.5 million and 19.8 million, respectively, for the fourth quarter of the prior fiscal year.
Net revenue for the fiscal year ended March 31, 2004 was $99.3 million, as compared to net revenue of $120.4 million for fiscal 2003. Roxio's net loss for fiscal 2004 was $44.4 million, or $1.62 per basic and diluted share, compared to a net loss of $9.9 million, or $0.51 per basic and diluted share, in fiscal 2003.
For the fourth quarter, Roxio's digital media software division recorded revenues of $27.5 million and pretax income of $4.8 million, including restructuring charges of $2.9 million. Revenues for the company's online music division totaled $6.1 million, and pretax loss was $9.8 million. Combined pretax loss for the two divisions was approximately $5.0 million.
"Roxio posted a strong finish to fiscal 2004, with fourth quarter results that surpassed our expectations for both our software and Napster divisions, as well as better than anticipated expense management and a cash and short-term investments position of $67.1 million at the end
of March," said Chris Gorog , Roxio's Chairman and CEO. "We have returned the software division to profitability and are very pleased with
the strong debut of Roxio Easy Media Creator 7, which has earned multiple Editor's Choice awards and continues as the frontrunner in the
digital media suite category. Napster continues to lead the Windows-only music download market and we are very pleased to be moving forward
with Napster's international expansion with world-class partners like Dixons Group. Napster's improving results are expected to help propel
Roxio to significant year-over-year revenue growth in fiscal 2005."
Business Outlook
For the first quarter of fiscal 2005, Roxio expects total revenues of approximately $28 million, with roughly $21 million from the software
division and $7 million from Napster. Net loss per share for the quarter is expected to be approximately $0.26.
For the fiscal year, the software division is expected to generate revenues in the range of $75 million to $80 million and continued positive
operating margins, reflecting continued growth in retail revenues offset by the anticipated decrease in OEM revenues. Expenses related to Napster
are expected to decrease as a percentage of sales over the next several quarters, and Napster is expected to deliver double-digit sequential
revenue growth throughout fiscal 2005, resulting in a revenue contribution of $30 million to $40 million.
Roxio Software Division Highlights
-
Launched Easy Media Creator 7, Roxio's next generation, full-featured photo, video, music, burning, and authoring applications which
combines the improved burning suite of Easy CD & DVD Creator with Roxio's best-of-breed PhotoSuite 7 Platinum, VideoWave 7 Professional,
and online music service Napster.
- Received Editor's Choice awards for Roxio Easy Media Creator 7 from PC Magazine, CNET and EMedia Magazine.
-
Announced the availability of Toast with Jam 6, which combines its best-of-breed CD and DVD burning software for the Macintosh, Toast 6
Titanium, with a rich array of studio-quality audio software that enables musicians and music lovers alike to create superior sounding
CDs and DVDs.
- Introduced VideoWave 7 Professional and PhotoSuite 7 Platinum, the latest versions of Roxio's digital video editing and photo editing software.
Napster Division Highlights
-
Introduced Napster's Super Peer™ application, an active cache-management system that employs IBM 's services and open standards-based
technology to help universities, ISPs and businesses conserve bandwidth and enable their customers to safely and rapidly download music
authorized for digital distribution.
-
Hired Brand Central LLC as its exclusive U.S. licensing agency to help extend Napster, the world's most recognized brand in online music,
into a full-scale lifestyle brand.
-
Appointed Michelle Santosuosso as VP of artist and label relations. Santosuosso brings a wealth of radio and record company experience to
Napster and will be responsible for managing and developing Napster's label and artist relationships, overseeing NapsterLive, the service's
exclusive in-house recording sessions, and creating new opportunities for artists with Napster.
Earnings Call Information
The Roxio fourth quarter teleconference and webcast is scheduled to begin at 1:30 p.m. , Pacific Time, on Wednesday, May 5, 2004 . To
participate on the live call, analysts and investors should dial 800-374-1636 at least ten minutes prior to the call and reference conference
ID: 6442030. Roxio will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations"
section of the company's Web site at http://investor.roxio.com .
ROXIO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, March 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $36,911 $36,820
Restricted cash 1,735 --
Short-term investments 28,490 16,677
Accounts receivable, net of allowance for
doubtful accounts of $991 at March 31, 2004
and $850 at March 31, 2003 16,279 18,196
Inventories 1,187 460
Prepaid expenses and other current assets 6,293 3,366
Deferred income taxes 150 4,709
Total current assets 91,045 80,228
Long-term investment 3,000 3,059
Property and equipment, net 9,933 9,058
Goodwill, net 91,723 55,247
Other intangibles assets, net 5,899 10,314
Other assets 1,748 589
Total assets $203,348 $158,495
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,610 $11,952
Income taxes payable 2,841 1,353
Accrued liabilities 30,102 20,987
Deferred revenues 1,545 725
Current portion of long-term debt 15,420 606
Total current liabilities 56,518 35,623
Long-term liabilities:
Long-term debt 68 5,490
Deferred income taxes -- 1,190
Other liabilities 2,381 --
Total liabilities 58,967 42,303
Stockholders' equity:
Preferred stock, $0.001 par value; Authorized:
10,000 shares; Issued and outstanding: none
at March 31, 2003 and 2002 -- --
Common stock, $0.001 par value; Authorized:
100,000 shares; Issued and outstanding:
33,543 shares at March 31, 2004 and 19,574
shares at March 31, 2003 34 20
Additional paid-in capital 195,503 127,804
Deferred stock-based compensation (1,386) (2,886)
Accumulated deficit (55,088) (10,675)
Accumulated other comprehensive income 5,318 1,929
Total stockholders' equity 144,381 116,192
Total liabilities and stockholders'
equity $203,348 $158,495
ROXIO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Year
Ended March 31, Ended March 31,
2004 2003 2004 2003
Net revenues:
Consumer software $27,498 $33,756 $87,332 $120,408
Online music 6,061 -- 11,964 --
Total net revenues 33,559 33,756 99,296 120,408
Cost of revenues :
Consumer software (1) 6,010 8,490 23,495 31,357
Online music (2) 5,163 -- 10,422 --
Amortization of purchased
technologies 604 651 2,399 2,791
Total cost of revenues 11,777 9,141 36,316 34,148
Gross profit 21,782 24,615 62,980 86,260
Operating expenses:
Research and development (3) 7,158 5,872 31,142 21,582
Sales and marketing (4) 8,450 9,198 42,625 41,255
General and administrative (5) 5,929 5,761 23,994 26,804
Restructuring charges 3,950 147 10,417 578
Amortization of intangible assets 868 986 2,803 3,610
Stock-based compensation charges 523 489 2,073 1,936
Total operating expenses 26,878 22,453 113,054 95,765
Income (loss) from operations (5,096) 2,162 (50,074) (9,505)
Gain on sale of GoBack product line 30 -- 10,622 --
Other income (loss), net (6) 26 (94) (15) 471
Income (loss) before provision for
income taxes (5,040) 2,068 (39,467) (9,034)
Provision (benefit) for income taxes 1,525 (256) 4,946 910
Net income (loss) $(6,565) $2,324 $(44,413) $(9,944)
Earnings per share:
Basic $(0.20) $0.12 $(1.62) $(0.51)
Diluted $(0.20) $0.12 $(1.62) $(0.51)
Weighted average shares used in
computing basic and diluted net
income (loss) per share
Basic 32,691 19,498 27,496 19,477
Diluted 32,691 19,783 27,496 19,477
(1) Excludes stock-based compensation charges of $9 and $10 for the three
months ended March 31, 2004 and 2003, respectively, and $38 and $49
for the fiscal year ended March 31, 2004 and 2003, respectively.
Excludes restructuring charges of $128 and $0 for the three months
ended March 31, 2004 and 2003, respectively, and $1,089 and $53 for
the fiscal year ended March 31, 2004 and 2003, respectively.
(2) Excludes restructuring charges of $0 and $33 for the three months
ended March 31, 2004 and 2003, respectively, and $2 and $0 for the
fiscal year ended March 31, 2004 and 2003, respectively.
(3) Excludes stock-based compensation charges of $136 and $142 for the
three months ended March 31, 2004 and 2003, respectively, and $561
and $715 for the fiscal year ended March 31, 2004 and 2003,
respectively.
Excludes restructuring charges of $1,352 and $14 for the three months
ended March 31, 2004 and 2003, respectively, and $1,949 and $42 for
the fiscal year ended March 31, 2004 and 2003, respectively.
(4) Excludes stock-based compensation charges of $121 and $127 for the
three months ended March 31, 2004 and 2003, respectively, and $503
and $113 for the fiscal year ended March 31, 2004 and 2003,
respectively.
Excludes restructuring charges of $97 and $84 for the three months
ended March 31, 2004 and 2003, respectively, and $1,006 and $297 for
the fiscal year ended March 31, 2004 and 2003, respectively.
(5) Excludes stock-based compensation charges of $257 and $210 for the
three months ended March 31, 2004 and 2003, respectively, and $971
and $1,059 for the fiscal year ended March 31, 2004 and 2003,
respectively.
Excludes restructuring charges of $2,373 and $16 for the three months
ended March 31, 2004 and 2003, respectively, and $4,674 and $186 for
the fiscal year ended March 31, 2004 and 2003, respectively.
(6) Excludes restructuring charges of $0 and $0 for the three months
ended March 31, 2004 and 2003 respectively, and $1,697 and $0 for the
fiscal year ended March 31, 2004 and 2003, respectively.
ROXIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended
March 31,
2004 2003
Cash flows from operating activities:
Net loss $(44,413) $(9,944)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 10,619 9,742
Stock-based compensation charges 2,073 2,641
Re-measurement of warrants issued to
strategic partner -- (705)
Provision for (recovery of) doubtful accounts (438) 649
Restructuring charges related to impairment
of fixed assets 2,416 --
Loss on retirement of assets 326 --
Gain on sale of assets (10,622) --
Deferred income taxes 3,559 (1,548)
Change in operating assets and liabilities:
Accounts receivable 2,422 10,391
Inventories (793) (147)
Prepaid expenses and other assets 1,798 (184)
Accounts payable (5,152) 1,959
Income taxes payable 1,483 4,256
Accrued liabilities 2,746 (7,491)
Deferred revenues 820 --
Other liabilities 2,381 --
Net cash provided by (used in) operating
activities (30,775) 9,619
Cash flows from investing activities:
Purchases of property and equipment (4,793) (4,187)
Proceeds from sale of assets 9,980 --
Purchases of other intangible
assets (63) (5,726)
Purchases of short-term investments (31,928) (27,578)
Proceeds from sale of short-term
investments 11,515 11,075
Maturities of short-term
investments 8,600 4,526
Transfer to restricted cash
accounts (1,735) --
Investment in non-consolidated
companies -- (3,000)
Acquisition of Pressplay, net of
cash acquired (14,552) --
Net cash used in investing
activities (22,976) (24,890)
Cash flows from financing activities:
Principal payment of capital lease
obligation (613) (557)
Payments of short-term debt (5,000) -
Proceeds from line of credit 15,000 5,000
Issuance of common stock under
employee stock plan 2,493 1,368
Issuance of common stock from
private equity financing 41,424 --
Repurchase and retirement of common
stock -- (1,065)
Net cash provided by financing
activities 53,304 4,746
Effect of exchange rates on cash 538 65
Change in cash and cash equivalents 91 (10,460)
Cash and cash equivalents at
beginning of period 36,820 47,280
Cash and cash equivalents at end of
period $36,911 $36,820
Supplemental cash flow information:
Cash paid for interest $490 $220
Cash paid for income taxes $1,313 $1,832
About Roxio
Roxio, a division of Sonic Solutions, develops and markets the best-selling digital media software in the world. Roxio offers
award-winning software products for CD/DVD burning, photo editing and video editing and has an installed base of over 150 million
users. Roxio distributes its products globally through strategic partnerships with major hardware manufacturers, through leading
retailers, through Internet partnerships and through direct sales at www.roxio.com. Roxio's
parent company, Sonic Solutions (NASDAQ: SNIC;
http://www.sonic.com) is the leader in digital media software and provides a broad range of software
tools and applications for creative professionals, business and home users and technology partners. Sonic's products range from professional
DVD authoring systems and interactive content delivery technologies that are used to produce the majority of Hollywood movies released on DVD,
to the award-winning Roxio- and Sonic-branded CD and DVD creation, playback and backup applications that have become the premiere solutions
for consumers and business users worldwide. Sonic's AuthorScript® is the de facto standard for CD and DVD burning and formatting and has
been licensed by major software and hardware manufacturers, including Adobe, Broadcom, Microsoft, Scientific-Atlanta, Sony, and many others.
Sonic Solutions is headquartered in Marin County, California.
Sonic, the Sonic logo, Sonic Solutions, Roxio, MyDVD, CineMagic, Plug & Burn, LiveShare, Roxio Easy Media Creator, and AuthorScript are trademarks or registered trademarks of Sonic Solutions or its subsidiaries in the United States and/or other countries. Dolby is a trademark of Dolby Laboratories. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license. Specifications, pricing and delivery schedules are subject to change without notice.